Last-minute tuition hikes hit students

This post comes from Annamaria Andriotis at partner site SmartMoney.

With freshman orientation right around the corner, many college students and their parents are about to get a surprise that could derail years of careful financial planning: last-minute tuition increases and cuts to financial aid packages promised just a few short months ago.

As states have finalized their budgets in recent weeks and months, cuts to public college funding have started to trickle down to parents and students. Since March, at least 19 states have cut money for public colleges. Some states, including Illinois and Georgia, are also slashing grants awarded to students just a few months ago.

Still more families won't find out about changes to tuition and financial aid packages until the end of the summer or even after the semester begins -- what experts say is the longest delay ever. "This will create real hardship for these students and may impact directly on their ability to enroll this fall," says Tom Horgan, president of the New Hampshire College and University Council. (Are you saving enough for college? Try MSN Money's calculator.) Post continues after video.

Long the affordable alternative to private colleges, tuition and fees for public schools have already been climbing rapidly. They're still much cheaper -- tuition and fees averaged about $7,600 for the 2010-2011 school year, compared with $27,300 at private colleges, according to the College Board -- but the new increases aren't trivial.

Last month, Texas and New Hampshire announced 6% to 10% tuition hikes at some public universities. A spokesman for the Texas Higher Education Coordinating Board says that as of now, the hikes impact two out of 35 colleges, with the potential for more to come. This month, California's four-year colleges are seeking to increase tuition by up to 12%, on top of an 8% to 10% increase that was announced earlier this year.

Worst year ever

"Public colleges and universities across the country have been put in a terrible bind," says Daniel Hurley, director of state relations and policy analysis at the American Association of State Colleges and Universities. "This academic year will be the worst on record in terms of public higher education funding."

In addition to tuition increases, the most generous portions of financial aid packages may also never materialize. In June, New Hampshire ended all state grants. Earlier this year, Georgia and Illinois awarded grants to students in financial aid packages, but the states recently scaled back those programs. For the upcoming year, Georgia's merit-based Hope Scholarship, which covered 100% of tuition costs, will instead pay for approximately 87% of tuition rates at the state's public colleges. The amount awarded by Illinois will remain the same for the fall semester but will likely be smaller in January.

The delay could give students additional time to make a plan, says Katharine Gricevich, director of government relations at the Illinois Student Assistance Commission. She says the financial aid letters students received listed an estimated grant amount and specified that grants could be reduced due to state funding problems. Still, she says, the commission is hopeful that there will be additional funds to minimize cuts in the second semester.

The states blame declining revenue. With less money coming in from property, sales and income taxes, they're looking for other ways to rein in their budgets, and colleges are a prime target. A spokesman for Georgia's Board of Regents says revenues from the state lottery, which funded the state's Hope Scholarship program, are not keeping pace with the demand for the scholarship.

What to do

Federal funding is at fault also: States have been receiving millions of dollars since 2009 from the federal stimulus, but that money has run out now. As state and federal governments cut their support of the schools, the schools look to parents and students to make up the difference.

At this point, there's little parents and students can do to cushion the shortfall. They can contact the college to find out if they're raising tuition further, or ask the college's financial aid office to provide more free aid if the state lowers their grant money, says Mark Kantrowitz, publisher of FinAid.org, which tracks financial aid issues.

For more radical results, a student could take classes at a local community college for a year or a semester. Those courses are typically much cheaper and can often be transferred for college credit.

Meanwhile, for students and families who are starting the process of shopping for colleges or saving for tuition, the cautionary tale seems clear: For the foreseeable future, public college tuition prices and financial aid promises may be unreliable.

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